Microsoft, Nokia Finalize Windows Phone Pact

Microsoft and Nokia announced Thursday morning that the two companies have signed a definitive agreement on a strategic partnership for Windows Phone OS and its associated global mobile ecosystem. The firms contend that the agreement comes ahead of schedule and thus demonstrates that both are moving "quickly and efficiently" to bring a new portfolio of Nokia-branded Windows Phone devices to market.

"We have entered into a win-win partnership," says Nokia President and CEO Stephen Elop. "It is the complementary nature of our assets, and the overall competitiveness of that combined offering, that is the foundation of our relationship."

"Our agreement is good for the industry," agreed Microsoft CEO Steve Ballmer. "Together, Nokia and Microsoft will innovate with greater speed, and provide enhanced opportunities for consumers and our partners to share in the success of our ecosystem."

Microsoft and Nokia spelled out a few specifics of the deal:

Nokia services heading to the Windows Phone ecosystem. Nokia will provide its mapping, navigation, and certain location-based services to the Windows Phone ecosystem, meaning that these services will be provided to all Windows Phone users, even those who don't purchase Nokia devices. Microsoft intends to monetize Nokia's "navigation assets" (currently a free perk on existing Nokia handsets) via "completely new forms of advertising revenue."

Microsoft services heading to Nokia devices. Microsoft will provide its Bing search services across the Nokia "device portfolio," which suggests Symbian-based devices, too. (Bing is already an integrated part of Windows Phone OS.)

Joint developer outreach. Microsoft's embrace of developers and its excellent Windows Phone developer environment are already the high point of this new platform, and Nokia developers will gain free registration (a $99 value) into the Windows Phone developer program.

A new Nokia-branded app store. Windows Phone devices currently connect to an online store called Windows Phone Marketplace to find, buy, and download mobile apps, but Nokia devices will utilize a Nokia-branded online store instead. (It will be based on the Windows Phone Marketplace infrastructure, however.) Developers will target both stores via a single interface, the companies say.

Mobile billing. Windows Phone OS will gain access to Nokia's vast billing agreements, allowing for mobile billing with 112 mobile operators in 36 markets.

Nokia paying royalty to Microsoft. Microsoft will receive "running royalty" payments from Nokia for the Windows Phone platform. The software giant says these per-device payments will be "competitive" and commensurate with the large volume of devices Nokia is expected to ship.

Microsoft paying billions upfront to Nokia. Microsoft will pay Nokia "billions" of dollars "in recognition of the unique nature of Nokia's agreement with Microsoft."

Intellectual property rights. Both companies will respect the value of the intellectual property rights owned by each and will put mechanisms in place for exchanging those rights. This is another area where Nokia will receive "substantial payments" from Microsoft (no doubt for its mapping, navigation, and location-based services).

Although many have questioned this link-up—in which Nokia will de-emphasize its own in-house mobile OS, Symbian, in favor of Microsoft's somnolent Windows Phone OS—the world's two most influential tech-analyst firms have already given it a thumbs-up. In recent weeks, both Gartner and IDC predicted that Windows Phone will race to the number-two market-share spot worldwide, behind Android but ahead of Apple's iPhone. However, as Gartner pointed out, this ranking will occur "solely by virtue of Microsoft’s alliance with Nokia." In other words, the firm has condemned Microsoft's Windows Phone strategy so far, and expects success only because of Nokia.

That makes sense: Since launching in October, Windows Phone has only reduced Microsoft's market share in the smartphone market, and handsets have sold slowly—so slowly, in fact, that Microsoft stopped providing unit sales numbers almost immediately. Estimates place total Windows Phone handset sales at roughly 3 million units since October, and that includes several different device types sold by multiple mobile carriers. By comparison, Apple sold a whopping 18.65 million iPhones in the most recent quarter alone.

As before, the companies are shooting for "volume device shipments in 2012." But Nokia CEO Stephen Elop previously noted repeatedly that he'd like to see some Nokia entry in the Windows Phone market before the end of 2011.